Continuing our discussion of the importance of a meaningful due diligence process, Brady Long, VP – Compliance, Deputy General Counsel & Secretary, Pride International, Inc., describes below some aspects of their very robust program.
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The discussion on managing intermediaries tends to center around substance – diligence, certifications, training, contracts, invoices, and monitoring/auditing. The process for accomplishing this is typically given less attention, presumably on the theory that each company is unique and should customize its roles, responsibilities and sequencing. While I generally agree with that theory, I believe there is a principle that should inform the process of managing intermediaries – a principle that is reflected in the design, administration and enforcement of my company’s intermediary management program. It is the principle that each intermediary works for the company, not the person or department that hired them.
As a technical matter, this is true of all vendors – e.g., their contract lies with the entity, they are processed through vendor set-up, they are paid through treasury. However, vendors understandably recognize allegiances to people over organizations, and they are loyal to the employee who gives them work, not necessarily the accountant who reviews their invoices. If this loyalty goes unchecked, the consequent risks, which are numerous and well-documented, include joining a rogue employee in a bribery scheme. In terms of process, though, the critical risk is that the intermediary will be unresponsive to other compliance-related requirements – e.g., completion of training, submission to an audit. If the intermediary doesn’t “answer to” your compliance team, for instance, why should they bother responding to that team’s requests for diligence? While this risk seems to pale in comparison to the actual commission of a felony offense, it may have the effect of concealing or even perpetuating one. Deadlines for diligence, certifications, training and clarification of invoices must be met, and intermediaries understand this best when they know that they don’t just work for the employee who “feeds” them – they also work for the employees who administer the process.
We’ve communicated this principle to our intermediaries through, first, subjecting them to the prior review and approval of the Antibribery Committee. This committee consists of at least one representative of senior management in all departments and meets regularly to discuss intermediaries. Our policies require, and our employee training reiterates, that an employee who wishes to hire a proposed intermediary (the employee being internally referred to as the “sponsor”) must satisfy the committee that the intermediary shares our values. Part of that is accomplished through the “Sponsor Memorandum,” in which the employee justifies the need for the intermediary and vouches for its reputation and compliance with antibribery laws, among other things. The sponsor also participates in the committee meeting at which the intermediary is reviewed, answering questions from the committee and hearing the committee’s concerns, if any. The effect of this is to create accountability, which increases the likelihood that the sponsor will communicate that the intermediary’s contractual requirements (which include diligence, training, etc.) are not “dead letters” but, instead, represent the company’s actual expectations for the intermediary.
Further, after the intermediary has been hired, it is subject to suspension by the committee for any “red flags” that arise, in accordance with the antibribery provisions of the contract. Avoidable delays can rise to the level of a “red flag,” and this is communicated to the sponsor and the intermediary. This further sensitizes the sponsor and the intermediary to requests that arise in the intermediary management program – they are to be satisfied, not put off or even ignored.
Second, we channel requirements for diligence, certifications and training through the sponsors, in recognition of the familiarity the intermediary has with the sponsor and the likelihood that the call, letter or email will be reviewed more promptly as a result. This requires working closely with the sponsors to explain to them the need for the requirements. However, it is an aspect of “imbedding compliance in the field,” which is the ideal. Further, when approached from the perspective of quality control, it is consistent with what the sponsor may already see as his or her traditional duties – ensuring that our vendors provide goods and services that meet our high expectations.
Third, all of our sponsors (along with all management and anyone else who has approval authority) receive annual in-person antibribery training, and a portion of the training focuses on (i) the risks associated with using intermediaries; and (ii) the process through which intermediaries are vetted and, if appropriate, approved.
Fourth, whenever I travel to the field, I make it a point to meet with as many sponsors and intermediaries as possible – not only to interview the intermediaries on, and remind them of, our policies, but also to ensure that they know that the sponsor and I, as an officer of the company and as Chairman of the Antibribery Committee, require them to uphold the company’s ideals. This invariably gives rise to a dialogue on the local landscape in terms of corruption and focuses them on the risks they should be anticipating.
